making your business less taxing

Travel – no longer a tax deductible expense for contractors

Are you a contractor working through your own limited company? Then the government are about to drastically reduce your tax deductible expenses!

Essentially, contractors will no longer be able to claim for their cost of home-to-work travel and subsistence.

The detail
At Budget 2015 the government announced its intention to consult on proposals that will restrict tax relief for the cost of home-to-work commuting for those employed through an employment intermediary and working under the supervision, direction or control of any person.

The widely criticised consultation has now closed and it is expected that from 6 April 2016 the government will remove the ability of contractors to claim tax free travel and subsistence costs when all of the following apply:
A. The contractor works through an employment intermediary whose business is substantially the supply of labour;
B. The contractor can be subject to (or the right to) supervision, direction or control in their work by any person;
C. The contract is performed within the UK – tax relief for the costs of travelling to workplaces situated overseas is not affected.

It is now highly likely that these proposals will be included in the Finance Bill 2016.

There is no getting around the fact that this is very bad news for limited company contractors that can now expect significantly higher corporation tax bills. Some contractor may be able to re-arrange their affairs to reduce their exposure to the new rules. All of our contractor clients will shortly receive personalised guidance.

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